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How Your Parents’ Failure to Pay $400 in Tax Bills Could Cost You Your Inheritrance

Written by Gary North on July 11, 2012

Tax liens are sold to investors by municipal governments. So are utility liens. A home owner could lose her property for failure to pay a $400 bill. Horror stories like these are common enough to get picked up by the media.

Old people may not understand the warnings send by local governments. If they fall behind in payments, the city may sell tax liens to investors. They sell these at discounts. The discounts make some of these investments pay 18%. The more common figure is 7% to 10%.

Real estate investors who specialize in these investments sometimes settle for interest payments from the owner. But the owner may be forced to pay all back taxes or utility bills. If he can’t, he loses his home.

“It’s a win-win for investors,” said John Rao, a consumer credit and bankruptcy attorney and the author of the report. Either the investor gets their investment back with interest or they get the home — typically, for a pretty sizable discount to what the home is worth.

The report cited a case of an 81-year-old Rhode Island woman who fell behind on a $474 sewer bill. A corporation bought the home in a tax sale for $836.39. The woman was evicted from the home she had lived in for more than 40 years and the corporation resold the place for $85,000, the report said.

Most investors, however, buy tax liens for the interest. That’s because many states allow investors to charge rates of 18% or more on the outstanding debts. And, in some cases, as much as 20% to 50%, the report said.

Nationally, property tax delinquencies are at $15 billion this year.

If your parent gets trapped, you could lose your inheritance: the house. It is crucial that you know the status of property taxes and other city bills.

One elderly Montana woman, who lived alone and had no close family to help her, fell more than $5,000 behind on taxes, the report said. After she failed to respond to letters from the company that bought her home in a tax sale, she was evicted from her Missoula home. As a result, she lost about $150,000 in equity in the property, according to the report.

For details about the tax lien situation, click the link.

Continue Reading on money.cnn.com

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19 thoughts on “How Your Parents’ Failure to Pay $400 in Tax Bills Could Cost You Your Inheritrance

  1. Admiral America says:

    There should be no property taxes if you pay off your home in full. If that's not the case then you don't actually own your home but rather rent it from the government. Property rights in this home of the free are a joke! Still the moron masses put up with it because they think it's the way it must be to run their amazingly efficient, and effective governments free of corruption…..NOT!

  2. sean murry says:

    These morons who elected this fake how do you like your change now.

  3. This isn't Obama's doing. It has been this way for YEARS. As much has Obama can be blamed for, this is not one of them.

  4. JPaul120 says:

    Agreed! I would even favor an initial mortgage rate hike and sales tax increase to pay for the local government facilities (i.e.fire and police) if they would drop the burdensome property taxes. But that will never happen.

  5. William 1 says:

    Now here is the "IMMORAL CAPITALISM" that most talk about when the say Capitalism is not good-it needs qualifier! Capitalism when moral works fine and the people who fall behind here should be met with a person to guide them through the problem-as in loan or small payments not just kick them out and sell the property for more that the 400 dollar bill was worth-God has a special place in Hell for these kind of people and he has your name and your families name!

  6. Do you have someone proofreading or editing these blog posts? There are all kinds of spelling and grammatical errors.

  7. I would say, obviously not; however, look at the typos and such from the organizations themselves and it you would know it wouldn't do any good, for they don't even have anyone knowledgeable to check their own spelling and grammar.

  8. But you would make the underground economy pay taxes. Liberals could no longer demagogue for higher taxes, really more government power.

  9. Dale Lynn Franks says:

    Public schools, dummy down effect.

  10. I have been saying this for years! We should not have property taxes on retired people or school taxes! This is a lean on your home for the rest of your life! Some states are doing away with it. We can do something about it. Talk to your state and city officials and see where they stand on it , they can summit a bill and try to get it passed. No one works for a paycheck anymore! They have forgotten who they work for, We The People!

  11. No American citizen should be subject to losing their home, as their only residence, due to taxation. Things like this, initiated by America's new Aristocracy, may be the spark of our next revolution.

  12. Californians did one intelligent thing a few years back, and passed Proposition 13 into law… that tax assessed value for their properties does not increase over time. Thus, someone buying a home for, say, $50K in 1960, will pay property tax based on that value as long as they own it. THAT works, is reasoable, and predictable. Here in Washbington, I have known a number of people who bought a $50K home in, say, 1980, but the value of that home has increased several fold… and the taxes do likewlse. Thus, a retired fixed income or low income person can, and often does, lose their home as their annual property taxes multiply.. mone are ten times what they were when I bought twenty some years ago, and the home is the same dump I bought back then. I can assure you I am receiving far less than ten times the benefit from those taxes.. seems they've mostly eneabled the county to hire a whole horde of "code enforcement" goons whose existence is justified by their going about looking for minor infractions (too many cars parked in my yard where no one can see them from off the property) to levy fines…… and I PAY for this? Ten times what I used to?

  13. Keith Mathison says:

    Property tax is a modern day liberal usurpation of home ownership that the Founders would never have approved. Americans are not serfs to a King who owns all the land but under Obama’s policies about 40% (instead of 3%) of all home sales are bank-sales and short-sales. People have lost their homes and are renting in record numbers. Since 2005 home values have plummeted about -50% while property taxes have skyrocketed about +50% squeezing more people out of their homes! They can not afford it! Property tax puts home ownership at risk and this liberal usurpation must be abolished.

  14. Western Attorney says:

    Gary North: This article does not make any sense. Foreclosure is used to pay off the lien, nothing more. The lien holder is not entitled to the value of the property, only the lien. I know this because I am an attorney. Please explain why a $400 lien entitles the lienholder to the value of the property no matter how much above $400 it brings at foreclosure sale.

  15. JPaul120 says:

    I don't think that's necessarily true about all liberal policies, because even Obama created a type of fair tax that forced everyone with currency to pay. That was exactly what happened when he printed more money. A lot of conservatives and libertarians criticized him for doing this, but he in fact implemented a tax that was more fair than Neal Boortz's proposal. The only ones that came out on the bad side were those who have bought into America's debt like China has. Now, don't think I support Obama, because I don't. I'm not a liberal. I just found the whole thing quite interesting.

  16. Texas grandmother says:

    Good question, Mr Attorney. Sounds like the lady was hoodwinked by greedy people, at any rate no woman should lose their home, especially having paid taxes for forty years. {I am replying as a guest}

  17. CharlieP says:

    I am aware of several family massacres occurring because of incidents similar to this taking place where the courts were involved, and made unjust decisions concerning ownership, which led to neither party benefiting. When people are stripped of their land holdings because of some peculiarity of the law which is basically unjust; often the bereaved party believes blood must flow. Not a good solution, however it is not uncommon in such case where property ownership is involved.

  18. Inflation is a hidden tax. I would call it taxation with representation, when the private secret FED defiles our currency. Even liberals would cry out if all their taxes came due and payable at one time and they saw how much of their hard earned money goes to support government.

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